The surge in world grain prices in 2007 and 2008—and the threat they pose to food security— has a different, more troubling quality than the increases of the past. During the second half of the 20th century, grain prices rose dramatically several times. In 1972, for instance, the Soviets, recognizing their poor harvest early, quietly cornered the world wheat market. As a result, wheat prices elsewhere more than doubled, pulling rice and corn prices up with them. But this and other price shocks were event-driven underdrought in the Soviet Union, a monsoon failure in India, crop-shrinking heat in the U.S. Corn Belt. And the rises were short-lived: prices typically returned to normal with the next harvest.
In contrast, the recent surge in world grain prices is trend-driven, making it unlikely to reverse without a reversal in the trends themselves. On the demand side, those trends include the ongoing addition of more than 70 million people a year; a growing number of people wanting to move up the food chain to consume highly grainintensive livestock products; and the massive diversion of U.S. grain to ethanol-fuel distilleries.
The extra demand for grain associated with rising affluence varies widely among countries. People in low-income countries where grain supplies 60 percent of calories, such as India, directly consume a bit more than a pound of grain a day. In affluent countries such as the U.S. and Canada, grain consumption per person is nearly four times that much, though perhaps 90 percent of it is consumed indirectly as meat, milk and eggs from grain-fed animals.
The potential for further grain consumption as incomes rise among low-income consumers is huge. But that potential pales beside the insatiable demand for crop-based automotive fuels. A fourth of this year’s U.S. grain harvest— enough to feed 125 million Americans or half a billion Indians at current consumption levels— will go to fuel cars. Yet even if the entire U.S. grain harvest were diverted into making ethanol, it would meet at most 18 percent of U.S. automotive fuel needs. The grain required to fill a 25-gallon SUV tank with ethanol could feed one person for a year.
The recent merging of the food and energy economies implies that if the food value of grain is less than its fuel value, the market will move the grain into the energy economy. That double demand is leading to an epic competition between cars and people for the grain supply and to a political and moral issue of unprecedented dimensions. The U.S., in a misguided effort to reduce its dependence on foreign oil by substituting grain-based fuels, is generating global food insecurity on a scale not seen before.
Source of Information : Scientific American(2009-05)